Critical Review: E.On (OTCMKTS:EONGY) versus Algonquin Power & Utilities (NYSE:AQN)

Algonquin Power & Utilities (NYSE:AQN) and E.On (OTCMKTS:EONGY) are both utilities companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, risk, earnings, institutional ownership, analyst recommendations, profitability and dividends.

Institutional and Insider Ownership

62.3% of Algonquin Power & Utilities shares are held by institutional investors. 0.1% of Algonquin Power & Utilities shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Dividends

Algonquin Power & Utilities pays an annual dividend of $0.26 per share and has a dividend yield of 4.6%. E.On pays an annual dividend of $0.49 per share and has a dividend yield of 2.3%. Algonquin Power & Utilities pays out 123.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. E.On pays out 32.7% of its earnings in the form of a dividend.

Risk and Volatility

Algonquin Power & Utilities has a beta of 0.73, suggesting that its stock price is 27% less volatile than the S&P 500. Comparatively, E.On has a beta of 0.67, suggesting that its stock price is 33% less volatile than the S&P 500.

Valuation and Earnings

This table compares Algonquin Power & Utilities and E.On”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Algonquin Power & Utilities	$2.61 billion	1.66	$180.80 million	$0.21	26.79
E.On	$89.03 billion	0.64	$1.96 billion	$1.50	14.43

E.On has higher revenue and earnings than Algonquin Power & Utilities. E.On is trading at a lower price-to-earnings ratio than Algonquin Power & Utilities, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Algonquin Power & Utilities and E.On’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Algonquin Power & Utilities	6.44%	5.58%	1.92%
E.On	4.49%	11.35%	2.69%

Analyst Ratings

This is a summary of current recommendations and price targets for Algonquin Power & Utilities and E.On, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Algonquin Power & Utilities	1	6	6	0	2.38
E.On	0	5	3	2	2.70

Algonquin Power & Utilities currently has a consensus target price of $6.43, suggesting a potential upside of 14.34%. Given Algonquin Power & Utilities’ higher probable upside, equities analysts plainly believe Algonquin Power & Utilities is more favorable than E.On.

Summary

Algonquin Power & Utilities beats E.On on 9 of the 17 factors compared between the two stocks.

About Algonquin Power & Utilities

Algonquin Power & Utilities Corp. is a Canadian utility company whose regulated businesses provide electricity, natural gas, water and wastewater services to customers in the United States and Canada. Many of its utility operations serve customers under the Liberty brand. The company has historically combined utility services with renewable power generation. Following the sale of its renewable energy business, Algonquin shifted its focus toward its regulated utility operations and the infrastructure needed to deliver essential services.

About E.On

E.ON SE is a Germany-based energy company focused primarily on energy networks and customer solutions. The company operates electricity distribution networks and gas networks, helping deliver energy to homes, businesses and other organizations. E.ON also supplies electricity and gas to retail and commercial customers and provides services such as energy management, energy efficiency and electric-vehicle charging. Its operations span several European countries, with a substantial presence in Germany and the United Kingdom.